Crisis causes underground economy to flourish in Spain

The crisis has caused Spain’s black market economy to grow significantly over the past few years, according to a study released Wednesday by the union of the technical staff of the Finance Ministry (Gestha).

Gestha’s report calculates that the value of under-the-table business in 2012 amounted to 253 billion euros, equivalent to 24.6 percent of GDP – that’s 6.8 percentage points, or 60 billion euros, more than at the start of the crisis in 2008.

The report, titled “The Underground Economy Takes Its Toll. The Increase in Fraud during the Crisis,” calculates that black market deals increased annually by 15 billion euros in the period 2008-2012.

“The underground economy has increased particularly in the regions most affected by the problem of unemployment and the bursting of the property bubble, such as Andalusia, the Canaries, Extremadura, Castilla-La Mancha and other regions in the central belt,” the report said.

The provinces with “strikingly low” levels of black market activity are those with a concentration of large national and international companies such as Madrid, Tarragona, Lleida, Barcelona and La Rioja. However, this fact is offset by the fact that such companies are more prone to use financial engineering to reduce their tax burden.

The report, drawn up by Jordi Sardà of the University Rovira I Virgili, does not include figures from the Basque Country, Navarre and Ceuta and Melilla, which have different tax systems.

The report highlights that almost 70 percent of cash transactions in black market activity use 500-euro notes.